Conference 2019 Break out 1b How do we deal with deficit budgets? - - PowerPoint PPT Presentation

Break out 1b How do we deal with deficit budgets?

Speakers - Jane Tully and Chloe Ramone (Money Advice Trust), Dave Orbinson (StepChange Debt Charity), Christy McAleese and Jasmin Matin (Citizens Advice)

www.malg.org.uk/conference

Conference 2019

Sponsored by:

Deficit budgets - a growing problem

Aims of the session

• Inform policy work across our
• rganisations
• Shape Citizens Advice research
• Inform refreshed Wiseradviser training on

deficit budgets

Growth in deficit budgets

Smaller amounts of debt

Growth in priority debts

For poorest households debt is almost half their income

Reason for debt often beyond people’s control

Low household incomes

Lower incomes more likely to have deficit budget

Impact on adviser well-being

Workload and resources Not being able to resolve other issues the client has that impact

• n their debt

problem Clients being in a vulnerable situation A lack of time to keep

• n top of

changes to legislation etc. A lack of time to do training A lack of specialist support if I get stuck Clients needing financial advice Clients needing benefits advice Clients needing pensions advice Clients with intractable debt problems that have no

• bvious

solution Lack of local support and supervision Other 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%

What, if any, are the main barriers to you providing effective debt advice?

Deficit Budgets - a growing problem

Citizens Advice Data

Deficit Budgets

As a percentage of total completed client budgets per year

Year Percentage %

16/17 32 17/18 33 18/19 35 19/20 38

In 2018/2019 18,197 deficit budget clients sought help with a debt issue. Of those clients only 6% (1,111) had soley financial services related debt issues. A quarter of the clients from the Debt Management Service have a deficit budget.

Average monthly income & expenditure

Year Income Expenditure Deficit 2016/17 £1,038 £1,205 £167 2017/18 £1,058 £1,221 £163 2018/19 £1,097 £1,283 £186 2019/20 £1,121 £1,324 £203

Client age profile

Year Under 25 25-39 40-59 60 and over 2016/17 4% 32% 52% 12% 2017/18 5% 35% 49% 11% 2018/19 6% 35% 48% 11% 2019/20 7% 35% 48% 10%

Household type

Year Couple no children Couple with children Single no children Single with children Other 2016/17 9% 18% 39% 31% 3% 2017/18 9% 17% 39% 32% 3% 2018/19 8% 18% 39% 32% 4% 2019/20 8% 18% 41% 31% 3%

Housing tenure

Year Owner (mortgage) Rented (Private) Rented (Social housing) Staying with friends / family Other

2016/17 12% 33% 48% 4% 4% 2017/18 11% 34% 48% 4% 3% 2018/19 10% 34% 48% 5% 4% 2019/20 10% 35% 47% 5% 2%

Deficit budgets policy research project

• Understand the scale and drivers of the deficit budget problem and the impact
• n people through a combination of quantitative and qualitative research
• Foundational research with the aim initiate and inform discussions with key

decision makers and stakeholders

• Develop policy recommendations - looking at potential solutions

Deficit Budget Pilot

Deficit Budget Client Journey:

• Advice process is followed, and as part of that, it is established that client is in a deficit budget situation
• Client is referred to Deficit Budget Service for ongoing advice and support
• Deficit Budget Service contacts creditors on clients behalf, requesting holding action / write off / etc
• Client remains with service as long as necessary whilst all available options to improve financial situation are

explored, including financial capability, income maximisation and exploration of insolvency solutions

• Client has a quarterly review. The timing of this is important in order to establish regularly whether there has been a

change in circumstances, to provide up to date information to creditors and to ensure that if any payment or insolvency solution has become available.

• Should a change in circumstances occur which means the client is either eligible for a paid solution, or an insolvency

solution, they will be referred to the most appropriate service for that. Referrals will initially be taken from:

• Local Citizens Advice offices

Data from Citizens Advice’s current Debt Management Service shows that, with ongoing support, approximately

• 11% of clients move from a nil offer situation to a debt management plan
• 12% move towards making some payments

Thank you

Christy McAleese and Jasmin Matin Christy.McAleese@citizensadvice.org.uk Jasmin.Matin@citizensadvice.org.uk

StepChange Debt Charity: Deficit Budget Clients

Dave Orbinson Senior Relationship Manager 24th October 2019

% of Clients with a Negative Budget

In 2018 we delivered full debt advice to over 304,000 clients through telephone and online channels.

Year % 2014 25.00% 2015 28.00% 2016 29.00% 2017 30.00% 2018 30.00% H1 2019 31.00%

Clients with a Negative Budget

Average Client Debt 2017 2018 H1 2019 Average unsecured £11,636 £11,406 £11,639 Average no. of debts 5 5 5 Average arrears and unsecured debts £12,572 £12,420 £12,607

Recommendations for these clients:

• Bankruptcy – 4%
• DRO – 2%
• Managed Token Payment Arrangement – 18%

Life Happens

In 2018, 7 in every 10 people who came to StepChange for advice said the primary reason they had got into problem debt was because of a life event or shock. The support people rely on may not be effective enough at keeping them out of financial difficulty. Instead, people rely on a range of coping strategies to try to avoid debt – in many cases these are fundamentally failing. They include: Borrowing money from family and friends Using Credit cards, overdrafts or high-cost credit Taking money from pension pot Using savings if available

Measuring Client Outcomes

Research which measures clients’ progress at 3, 9 and 15 months after advice. Splits clients into specific groups, including clients who have Negative Budgets, and clients who have Negative Budgets and are Vulnerable Unsurprisingly, clients with negative budgets are making less progress – 1 in 5 clients without a vulnerability and in a negative budget say they have made no progress in sorting their debts after 3 months 36% of clients with a negative budget and vulnerability report confidence in making ends meet 3 in10 vulnerable clients in a deficit budget do not think they’ll be able to make ends meet in 6 months

Measuring Client Outcomes

Financial Resilience is a key part of a client’s road to financial recovery Only 1 in 5 clients (21%) said they had been able to save up for future costs Only 13% of clients with a negative budget and only 6% of clients with a vulnerability and a negative budget said they had started saving More than 1 in 5 (22%) clients with a negative budget were resorting to credit use at 3 months after debt advice. For negative budget clients, the path to financial recovery is long and difficult, despite having the knowledge and understanding of the steps they need to take.

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